Compressed into nothingness

Ben Butler

Adam Clark said he wanted to ''improve global communications for the betterment of humanity''. Investors who believed him ended up $27 million poorer. Despite the huge loss and the failure of the technology to work, no one has ever been prosecuted.

The Adams Platform technology could compress video by a ratio of a thousand to one, Mr Clark said. It could transmit full-screen, broadcast quality video over a standard phone line, he said. It couldn't.

The claims seemed even more outrageous in the early 2000s, when broadband internet had yet to become the commonplace it is today. The potential seemed unlimited, and Mr Clark excited a huge amount of interest as well as a fair amount of scepticism.

It all amounted to nothing, and the company he floated on the ASX to exploit Adams Platform quickly folded after admitting there was no evidence the technology worked.

But not before Media World Communications collected $27 million from investors, $17.7 million of which made its way into the hands of entities related to Mr Clark.

Today, more than six years after MWC collapsed in September 2004, investors who lost everything they put into the company are finally getting their day in the Victorian Supreme Court.

Advertisement

Maurice Blackburn, who are running the class action lawsuit, are claiming more than $40 million, made up of the loss to investors who bought worthless shares in MWC and interest. But even if the court finds for the investors on every point, it is unlikely they will ever be paid a single cent.

While there were 10 defendants when the lawsuit was filed in 2005, Mr Clark and his father, Graeme, have since been made bankrupt.

On Thursday, Maurice Blackburn settled with Mr Clark's long-time lawyer, John Velik, for a confidential amount believed to be about $30,000. The deal followed a settlement last month with Mr Clark's associate, John Tatoulis.

Any money recovered from the two men is unlikely to make much of a dent in legal bills run up during five years of interlocutory stoushing, with Maurice Blackburn believed to have spent more than $1 million. But because it is not certain there is no money to be recovered, class action rules compel Maurice Blackburn to continue with today's trial.

The law firm will be squaring off against two men who featured heavily in MWC's April 2004 prospectus. They are the US testing guru Kevin Tolly, whose Tolly Group produced a glowing technical report saying the Adams Platform offered ''a radical improvement over existing commercial solutions'', and the MWC chairman Michael Ramsden, of float advisers Terrain Capital.

In defences filed with the court, Mr Tolly says he ''took all reasonable and adequate steps to ensure that the Tolly Group APT testing was not compromised'', while Mr Ramsden says MWC had ''reasonable grounds'' for releasing the prospectus.

It took ''about half a month'' to develop the Adams Platform software, according to Mr Clark. He worked on it ''day and night, basically,'' the then 22-year-old said in a 1998 interview, broadcast on Monash University student radio.

''About four days before I had it finished, I still hadn't got it to a stage where it was actually being compressed enough and was deliverable. And then I did wake up one morning and thought, 'Hang on a minute, try that'. So I bashed away on the computer for about the whole day and got something that was workable.''

Even in those early days there were those who found it all too good to be true, in part because Mr Clark wouldn't agree to test the software on computers he didn't control.

A demonstration for The Age was stopped because of ''security concerns'', Mr Clark told the student radio host, Tom Reynolds.

''Then lots of things happened, I got mixed up with this security consultant that was sending me photos of people in balaclavas, saying the Mafia may be after you after this going in the paper,'' he said. ''I'm just taking that as a bit of a joke.''

One of those declaring himself ''sceptical'' was a Monash University video expert, Terry Cornall, who was sitting in on the interview. Responding to Mr Cornall's questions, Mr Clark said that people found his story hard to believe. ''And personally, I would too,'' he said.

''If someone came to me before I invented it and said 'I can do this', at first I would be sceptical and then I would say 'How can I buy it?' ''

Mr Reynolds asked how much money Mr Clark stood to make from the invention.

''I don't want the monopoly on the market, I just want to live comfortably - which I am already doing.''

MWC unravelled almost as quickly as Mr Clark had developed his software. On September 3, 2004, the board of MWC told the ASX it could not sign off on the performance capabilities of the software.

On September 8, the company admitted that when the software was removed from the client computer, ''the APT video file still played''. ''This is not supposed to happen under normal circumstances,'' Mr Ramsden said in a statement to the ASX.

By September 22, the company was in administration, with Mr Ramsden saying the administrator, Craig Crosbie of PPB, would be able to ''complete a totally independent investigation into the serious matters that have been raised by the company's technical report''.

From prospectus to administration, the float lasted less than six months.

Mr Crosbie found the technology ''did not reveal any evidence of compression technologies that are not already commercially available''.

''Moreover, the PricewaterhouseCoopers review concluded that there is an abundance of evidence that the encoding allegedly performed by the AP technology was actually performed by commercially available hardware and software disguised to make it appear as AP Technology,'' Mr Crosbie said in a December 4, 2004, report to creditors.

The Australian Securities and Investments Commission, which was given a copy of Mr Crosbie's report, has never brought civil or criminal action against any of the people or companies involved in the debacle.

The Maurice Blackburn principal Ben Slade, who is running the case, is at a loss to explain ASIC's inaction.

''I had a conversation with an ASIC officer not long after the proceedings were commenced in 2005, who indicated to me that ASIC was not at that stage of the mind to pursue Adam Clark or others associated with the failed company,'' Mr Slade said. ''I was told by the officer that he could not give me any reason for that.''

Insurance policies held by the various defendants are just as ''unresponsive'', Mr Slade said.

''Terrain Capital had professional indemnity and directors and officers insurance policies that have been denied because they excluded capital-raisings, when the company was set up for the purpose of capital-raising. It was totally unfit for its purpose.

''MWC had directors and officers policies that were declined because they also refused to cover capital-raising and would not respond

if the company went into administration. That was also completely useless.

''And only one policy appears to be responding in any way, and that policy was inclusive of defence costs, and the lawyers have successfully spent most of that by conducting interlocutory hearings on side issues.''

Adam Clark's money appears to be gone, too.

In 2002, he signed a three-year deal to sponsor an Oaks Day marquee, right next door to the Myer tent in the Birdcage.

Mr Clark also got into the hospitality industry, investing in the Open Door Pub Company, which owns a string of thriving hotels across Melbourne.

But in 2007, he was declared bankrupt after another of his ventures, Melbourne Base, ran into financial trouble.

And while in its heyday the Adams Platform was a closely-held secret whose mysteries raised millions of dollars from eager investors, these days the technology - or, at least, a page of equations - is available at no cost on the internet.

A steal for equations that are, according to the website www.adamsplatform .com.au, nothing less than ''the mathematical expressions governing the form, content and behaviour of matter''.

It is believed ASIC investigated MWC and a prosecution was seriously considered. An ASIC spokeswoman declined to comment.